Silver City mall debt is top concern in soured CMBS portfolio

Fitch Ratings has downgraded 10 slices of a $2.1 billion portfolio of commercial mortgage-backed securities, noting that most of the pool’s investor classes will be wiped out as troubled-property debts mature.

And the ratings firm said the biggest dud of the bunch is in our own backyard. As of this week, the $125 million mortgage backing the Silver City Galleria in Taunton was listed as a top concern among Fitch analysts rating the circa-2005 CMBS portfolio. The loan is the pool’s largest debt, equal to around 6 percent of its outstanding principal balance.

Occupancy at the 715,000-square-foot mall remained at 82 percent at the end of 2010, roughly the same level posted a year earlier. Major tenant exits have included Steve & Barry’s, which filed for bankruptcy protection in 2008, and clothing retailer Old Navy, which together occupied around 14 percent of the mall’s rentable space, according to Fitch.

The property’s cash flow slipped to around 92 percent of its debt service at the end of 2010, versus 99 percent at the end of 2009. The loan has officially been in default since November 2009. Silver City’s problems were first detailed in Page 1 story in the June 21 edition of the Boston Business Journal. Last month, The Round Up reported the mall’s owners, General Growth Properties of Chicago and the Teachers’ Retirement System of the State of Illinois, were considering “alternative sale structures” for the property. The Round Up’s previous attempts to clarify those efforts were unsuccessful.

According to Fitch, 10 tranches — classes G through P — of the Silver City CMBS portfolio will be “deleted” by losses on specially serviced loans. Fitch said 44 of the portfolio’s 158 loans have been flagged as “loans of concern,” while another 14 are in special servicing. The mortgage-securities pool was assembled and sold by a JPMorgan Chase affiliate in 2005.